Revenue cycle management (RCM) is an increasingly important part of healthcare IT that focuses on processes that collect revenue from patient care, especially but not exclusively around claim submission and insurance denials. Done correctly, RCM can dramatically lower administrative costs while increasing revenue capture and reimbursement.
The importance of RCM is underlined by the rapid growth of the industry, from just over $80 billion in 2016 to $120 billion today. Experts predict that it will continue to grow by approximately 12% per year.
This article will break down the benefits of effective RCM solutions, review the six key factors to evaluate in an RCM system, and look at what we expect out of RCM in the future.
Two Keys Benefits of Revenue Cycle Management
The first benefit of RCM comes in the form of reduced costs from digitizing, automating, and linking together collection processes. A recent report found that healthcare companies saved $122 billion in administrative expenses through RCM software in 2020. The same report identified a further $16 billion in savings that could be achieved by automating just nine common transactions.
The second benefit relates to improved revenue collection. According to a 2020 report targeting medical CFOs, two-thirds of claim denials are recoverable and 90% of them are preventable. In an environment in which claims denials are increasing, recovering or preventing them can provide a meaningful boost to a practice’s revenue. While there is limited data about the impact of RCM on individual practices, one provider of laboratory RCM software suggests that employing a state-of-the-art RCM system increases net collections by 31% on average.
Revenue Cycle Management Systems – 6 Factors What to look for
First, take it as read that an efficient RCM process needs to be automated; 92% of hospital CFOs and revenue cycle leaders agree that RCM automation is crucial. In addition, we should draw a distinction between legacy RCM systems, which usually only deal with claim submission, insurance denials, and payment collections, and modern RCM software, which covers the six functions below:
- Online pre-visit patient data capture: Practices should be able to have patients provide insurance and demographic information before they arrive at the point of care. (This information should be confirmed – but not generated for the first time – at the appointment itself). By collecting this information accurately and in digital form up-front, there are far fewer chances for issues to arise later in the process.
- Utilization Review: This part of the process should automatically match the patient’s insurance information and coverage with the recommended course of treatment. The value of digitalization and automation here comes in avoiding time-consuming phone calls and faxes to increase efficiency.
- Co-pay collection: Collect patient co-pay based on insurance information and recommended treatment.
- Pre-loaded CPT and ICT compliant coding: Administrators know that accurate use of CPT and ICD codes is crucial to efficient reimbursement. Most modern RCM systems come with pre-loaded code templates which facilitate automated and accurate claim submission to common payers such as insurance companies.
- Managing claims: As mentioned above, most claim denials are recoverable and preventable. Preventing denials is covered by previous steps 1, 2, and 4; recovering denials is handled in this part of the process. The best RCM software comes pre-equipped to help physicians and administrators do so.
- Reporting and analysis tools: This final component of RCM is often neglected but may ultimately prove to be the most important as the healthcare system transitions (slowly, and in fits and starts) from a fee-based model to one placing greater emphasis on value-based reimbursement. Powerful and customizable reporting will be necessary for providers to show that they are helping generate better health outcomes in order to qualify for higher reimbursement rates.
Outlook and Conclusion
The rapid growth of the RCM software market and projections for further growth underlie the importance of modern RCM systems and processes for physicians and clinics — especially as the claims reimbursement process increases in complexity and third-party payers such as insurance companies themselves demand digitalization. In addition, we can expect the move toward value-based reimbursement to add tailwinds to this trend. In summary, effective management of RCM processes is already very important for most practices and will only become increasingly so in the future.
